Non Farm Payroll on Friday?
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  1. #1
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    Default Non Farm Payroll on Friday?

    What would happen to the FOREX market if the number came in quite a bit higher that the 105K that the market expects? There is a report on Yahoo that the number is upwards of 158,000. Specifically, what would happen to the EUR/USD pair. Thanks

    Brett

  2. #2
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    I believe the 158,000 number you're talking about is from the ADP employment index released today. It's the largest gain in the ADP index since June's 368,000.

    The ADP report is considered by some to be the best single predictor of the government's nonfarm payroll report, but its record has been spotty since being rolling out in public in April. So just because ADP shows good numbers doesn't necessarily mean the NFP will.

    For example, the ADP report got it wrong in June, when it forecast private-sector gains of 368,000, while the government report showed just 107,000 new jobs created in the private sector and an additional 27,000 government jobs. Since then, the ADP has been off by an average of 48,000, compared with the government figures. The consensus of economists has been off by an average of 46,000.

    Regarding your question of what would happen to the EUR/USD if the NFP is good, you obviously didn't read my blog post, Euro Top? on Monday.

    But that's okay, here's a recap:

    "Strong Employment Report. The market has seen the crystal ball and believes that the US economy is in for a hard landing (think plane crash landing) due to its slowing housing market as well as possible interest rate cuts by the Fed mafia early next year. These assumptions (guesses) could all change Friday. If there is large revision upward of last month's (Oct) non-farm payroll numbers or a huge gain in November, look for the dollar to rise from the dead. A strong labor market will provide evidence that maybe the US economic outlook isn't as bad as it seems and there's really no need for the Fed to start cutting."

  3. #3
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    pipdiddy,

    thanks for the education on ADP. I did read your post but forgot about it and wanted a little clarification. I am looking forward to the news tomorrow out of Europe and the employment report on Friday, as I am shorting the Euro right now.

    B

  4. #4
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    The problem for USD is that traders will look to sell it sharply into any kind of data weakness. Yes, some data turn to be positive for the greenback but "short lived effect" that is reversed as soon as any weak report is out after that.

    I do expect a strong labour report, giving fresh and brief rally to US currency, but to be short lived and more like a profit taking than reversing a position.

    Traders will look to buy EURUSD from dips in such event.

    I say that for a reason, because with all Fed speakers being hawkish, market failed to react to any hawkish comment that they won't cut rates soon. This is a big signal that market is looking elsewhere, and indeed US currency needs more than a strong Non Farm Payroll to make a "significant" rally.

  5. #5
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    The only thing that will "save" the dollar in the next month or so is if the market reduces expectations of a rate cute early next year.

    If the Fed can convince the market that they ain't cutting no rates no how anytime soon, then the dollar will take no prisoners.

  6. #6
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    Cool Possible Dollar Rally

    My thoughts on the next NFP report out tomorrow will be a higher number. I think we will see a US Dollar rally, it will not break any major supports but instead bounce off and head back in favor of the Euro. The report will not get the US Dollar out of it's sell off, but only give a better opportunity to get in on long trades at a lower number. Expect the Euro to work it's way to, possibly the 1.70 area by Q2. This move will really start after the holidays when consumer spending slows to a halt, and everyone is working on paying their credit cards off lol.

    Thx

  7. #7
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    Quote Originally Posted by shaggie View Post
    Expect the Euro to work it's way to, possibly the 1.70 area by Q2. This move will really start after the holidays when consumer spending slows to a halt, and everyone is working on paying their credit cards off lol.
    Did you say 1.70 for EUR/USD?!

    You are talking about an almost 28% appreciatiion within 6 months. You know of some geopolitical event that's going to happen in the future that you're not telling us??

    Please let us in on it so I can buy 10,000 standard lots of EUR/USD at 400:1 now and pre-order my personal jet and draft my chateau blueprints.
    Last edited by PipDiddy; 12-08-2006 at 01:38 AM.

  8. #8
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    Red face Oops Sorry

    That is supposed to say Q2 08, thx for pointing that out PipDiddy.

  9. #9
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    Short lived strength, now we see some profit-taking.
    It appears that Euro is still overbought on Daily/Weekly charts. The pair is seen challenging 1.3361/62 highs again. What do you think?

  10. #10
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    Quote Originally Posted by topchess View Post
    The pair is seen challenging 1.3361/62 highs again. What do you think?
    Not sure about the 1.3361 area but I have no doubts that it will retrace a good bit of the damage from friday, I will start buying some back on Sunday/Monday

    I am not convinvced that the rate hikes are over here in the States, I seriously doubt there will be a rate cut early next year like the stock market is counting on
    Last edited by labj; 12-09-2006 at 10:04 PM. Reason: DOh wrong thread

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